Iraq blacklists tankers involved in shipping Kurdish crude

Reuters

Iraqi state oil firm SOMO has blacklisted three tankers involved in shipping crude from Kurdistan, stepping up pressure on the semi-autonomous region amid tense talks on sharing oil revenue.
Kurdistan has been exporting crude independently via Turkey since mid-2015 after saying Baghdad had failed to respect an oil revenue-sharing deal and transfer enough money to Erbil.
Baghdad, which exports most of its oil from the Gulf, has said Erbil was not exporting enough crude under the deal.
Last week SOMO sent market participants a letter – seen by Reuters – saying it would no longer allow the ships Maran Centaurus, Four Smile and SN Olivia, which had been shipping Kurdish oil, to enter Iraqi ports or export its crude.
Baghdad has regularly sent such letters in the past. It had refrained from doing so in recent months as it was preparing for new talks on revenue-sharing with Kurdistan and had resumed shipping crude from the northern Kirkuk fields to Kurdistan. SOMO did not immediately respond to a request for comment on the latest letter.
The semi-autonomous region exports around 500,000 barrels per day (bpd) of its own crude from the Turkish Mediterranean port of Ceyhan. Baghdad’s shipments to Kurdistan of Kirkuk crude, which it restarted earlier this month, have been only half the previously supplied 180,000 bpd.
Baghdad said last week it could divert the Kirkuk crude to Iran by truck instead of sending it to Kurdistan via pipeline if the talks on revenue-sharing broke down.
The move may further undermine Kurdistan, whose funds have been sapped by its fight against IS militants. The region’s oil exports do not cover its budget needs.
Diverting oil to Iran could also damage the unity of Iraqi Kurdistan, which had been counting on additional crude from Kirkuk.
The only way SOMO could truck oil to Iran would be through the central Kurdish region
of Suleimaniya, controlled by the Patriotic
Union of Kurdistan, a rival of the Kurdistan Democratic Party of Kurdish President Masoud Barzani in Erbil.
“The move could be very divisive for the Kurds but also it could set a precedent for other political parties in Iraq to demand their own oil,” a government source in Erbil said.
Sending crude to Iran would also involve significantly higher trucking costs – estimated at up to $20 per barrel – than sending oil by pipeline to the Mediterranean, thus further reducing revenues from oil exports.
Meanwhile, Iraq doesn’t
expect to resume production from the northern Qayyara
oil region before the capture
of nearby Mosul from IS, an
oil ministry spokesman said
on Tuesday.
The region’s two main fields, Qayyara and Najma, used to produce up to 30,000 barrels per day of heavy crude before it fell under control of the ultra-hardline militants two years ago. It has also a small refinery to process some local oil.
“The rehabilitation process cannot resume unless the security situation improves with the conclusion of the battle for Mosul” some 60 kilometres (37 miles) north of Qayyara, oil ministry spokesman Asim Jihad told Reuters.
The Iraqi army took Qayyara back last week and oil ministry services started putting out fires at wells caused by insurgents as a tactic to escape air surveillance and hamper the progression of Iraqi forces. The oil ministry also dug trenches to prevent oil spills from reaching the Tigris river, Jihad said. “They were contained,” he added.
Angolan oil company Sonangol pulled out from an agreement to increase output at the Qayyara fields in 2014, citing the increased security risk.